NCPA - National Center for Policy Analysis

Canadian Firm Seeks Damages From U.S. Under NAFTA

January 28, 1999

A little-noticed provision in the North American Free Trade Agreement is being cited by a Canadian funeral home company seeking $725 million in damages from the U.S. government. Legal experts say it is the first claim of its kind, but other companies might be encouraged to adopt the same tactic.

  • In 1995, the company based in Burnaby, British Columbia, lost a $500 million verdict in a Mississippi court in a fraudulent business practices case.
  • The company charges that the verdict against it was "infected by repeated appeals to the jury's anti-Canadian, racial and class biases."
  • NAFTA promises fair treatment to foreign investors and designates the International Center for the Settlement of Investment Disputes, a division of the World Bank, to arbitrate claims.
  • Some of those who were most involved in the debate over the trade agreement five years ago say they did not anticipate claims based on court verdicts.

Some legal experts say the funeral home's claim advances a creative but plausible legal argument. Other experts say the case will test whether international trade agreements will be a new forum for business discontent with the American court system.

"It is an important case because it raises the question of the extent to which domestic civil judicial proceedings will be subject to international re-examination," says David W. Leebron, an expert on trade law and the dean of Columbia Law School.

Source: William Glaberson, "NAFTA Invoked to Challenge Court Award in U.S.," New York Times, January 28, 1999.

 

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